Investing in a house -- Do I need to be Home for Contractors/SubContractors?

Question

Hi Everyone,

This is my first post, and I am a newbie trying to get into Real Estate investing hopefully in late 2012.  A little background, I would be living approximately 30-40 minutes away from my investing location in Philadelphia.  I have a full time job that I must focus on, and I was planning on hiring a property manager.

(Assuming I don't have the property manager yet..)
My question is if I buy a house that requires low to moderate work, would I have to be present to give the keys each time or oversee the work each time a contractor comes in?  Or would one key-hand off of a duplicate key be sufficient?  I assume by paying per contract rather than per hour, I would be salvaged from gross expenses (since I'm away from the house).  By the way, I would not be renting until the work is complete, so the house should be empty.

(Assuming if I did have a property manager)
Furthermore, a similar question, would a property manager coordinate the low to moderate work on the house?  Or would they refuse and only perform basic repair/maintenance.

Thanks for any advice!!

Brandon Cao · Answer

Thanks a lot for everyone's advice.  I'll be sure hire the right professionals!

Donna Smolinski · Answer

Ahmed,
Workman comp rules probably vary from state to state.  In CA, a contractor is REQUIRED to carry Workers Comp, even with one employee (not required to carry for themself).  Our laws are VERY strict here.  A roofer is required to carry Workers Comp, even on himself, with no employees (due to high risk injury).  In fact, we own a small real estate office, and we are even required to have Workers Comp for our sales agents, who are independent contractors.  CA is probably one of the strictest states with Workers Comp and Contractor laws.

Gen Contractor is not required to carry Workers Comp in CA IF he has no employees.  Funny thing is, our sales agents aren't employees, they are independent contractors, so we've never understood why we are required to have them on Workers Comp, but it's just the way it is here.

Ahmed Porter · Answer

I am a Licensed contractor in the DC MD and Va area and for a project like that its ok to leave the key have the scope spelled out and good to have two lock box keys someone always walks away with it and brings it back a few days later if you been in this business long enough.I would also have them to send you pictures before and while work is done and after so you can see what is going on most contractors have smart phones and you can ask that they send you 10 pictures of the work on each phase .Check your REI and local supply places or referral to do the work are your best places. The lic are Good but is only as good as the person behind it. As a general contractor we are not required to carry workmen comp but you can draft up a form saying that the GC is responsible for all the subs he brings on the site have did it many of times.

Donna Smolinski · Answer

Yes, that's true Karen.  Thanks for the clarification.  I only mentioned this, because I have seen many contractors use unlicensed helpers on the job who are NOT covered under Workmans Comp which can be a liability issue if they are hurt on the job.  Also, if using subs, the homeowner should get a copy of the sub's license & insurance.

Steve Babiak · Answer

Brandon,

In Pennsylvania, the Attorney General has a website where you can look up contractors to see whether they have a state license (it will have a HIC number).  You should also see if there are any criminal matters involving the contractor (there is another state website for this).  You should also look up judgments against them at the county prothonotary (where they are located or where they have done work).

The lockboxes are a good idea to use; just avoid giving the combination to just anybody until you have investigated their background a bit.

You should have them get their insurance agent to issue a certificate of insurance where you are named as the certificate holder, so that you are notified of changes or cancellation in their coverage.  This certificate will have separate sections where you will see liability and workmen's comp separately.  If a sole proprietor, there may not be workmen's comp coverage as indicated by Karen M. above; but you should in that case ask them to sign a waiver so that you don't get stuck with any claim due to injury.  Injuries happen in this business, and they happen at job sites.

That's all for now.

Karen Margrave · Answer

Donna Smolinski actually contractors aren't required to carry Workmans Compensation Insurance unless they have employees. If they do the work themselves or are using licensed subs, it's not needed.

Lynn McGeein · Answer

Brandon, the lockbox is a great idea, one I will use in the future, but I, personally, would want to be there to check up on the work, make sure it's correct, the property is properly secure at night while vacant, etc.  We buy property out of state, but during initial work post-closing, we're always there working alongside contractors, making sure everything is running smoothly and on-time.  Once it's ready to rent, we turn it over to our property manager, although we reserve the right to do repairs over $200 and turnovers ourselves in our contract with them.   Also, in both states where we use property managers, our contract with them states they get paid an additional hourly rate if needed for anything above normal property management duties.  Meeting contractors before our first tenant is in or meeting an appraiser for a refinance, we would have to pay them an additional fee, so we don't do that.  Maybe that is not standard, but it's been in all the contracts I've seen with the managers I've looked into.

Brandon Cao · Answer

Thanks a lot to both of you!  The lockbox is an excellent idea with it being able to attach to the door!  I was really worried about it eating up my time, but this seems like a great solution.

Also, thanks for the advice regarding the contractor's suitability -- licensed and bonded.  I'll be sure not to overlook these characteristics and search Angies List.  Small price to pay to prevent bad contractors!

Donna Smolinski · Answer

If you aren't doing a major rehab, you shouldn't need to be there to oversee work since it will be vacant.  As the previous poster said, use a combo lockbox, but put TWO on the property, just in case one forgets to put the key back.  If you are doing much more than simple carpet, paint and minor repairs, you should be ok.  Ask contractors for a copy of their license before you hire them.  If they are using workers, make sure they also have Worker's Compensation insurance!  MANY contractors do not have this, even though they are required to.  I ALWAYS check the site on the state contractors board too, for current licensing info.  If you are looking for contractors, try Angie's List.  I've had good success several times from that site.  Good luck!

Karen Margrave · Answer

Brandon C. You can purchase a combo lock box to put the key in, and give combination to subs, along with a key to property manager (in case somenone forgets to put key back). Make sure your subs are licensed and bonded.  I'm sure the property manager will perform whatever services you contract for.